Question

Several years ago, senior executives at energy company CanOil wanted to acquire an exploration
company (HBOG) that was owned by another energy company, AmOil. Rather than face a hostile
takeover and unfavorable tax implications, CanOil’s two top executives met with the CEO of AmOil to
discuss a friendly exchange of stock to carry out the transaction. AmOil’s chief executive was previously
unaware of CanOil’s plans and, as the meeting began, the AmOil executive warned that he was there
merely to listen. The CanOil executives were confident that AmOil wanted to sell HBOG because
energy legislation at the time made HBOG a poor investment for AmOil. AmOil’s CEO remained silent
for most of the meeting, which CanOil executives interpreted as an implied agreement to proceed to buy
AmOil stock on the market. But when CanOil launched the stock purchase a month later, AmOil’s CEO
was both surprised and outraged. He though he had given the CanOil executives the cold shoulder,
remaining silent to show his disinterest in the deal. The misunderstanding nearly bankrupted CanOil
because AmOil reacted by protecting its stock. What perceptual problem(s) likely occurred that led to
this misunderstanding? Note: In 300 words or more

Answer 1